July 18, 2008

 

Asia Grain Outlook on Friday: Corn buying may slow as korea buys wheat

 

 

Asian corn demand is likely to be weak next week, as one of Asia's biggest buyers - South Korea - has largely concluded its purchases for the year.

 

South Korean feed millers have already bought enough corn for this year, traders said, adding that feed millers have substituted a large amount of corn with feed wheat.

 

"Since corn and feed wheat can be substituted easily for each other in feed formulations, South Koreans have taken advantage of cheaper feed wheat prices," said a grains buyer in Seoul.

 

So far this month, South Korean feed millers have bought a total of 330,000 tonnes feed wheat, mostly of Ukrainian origin, at around US$360 a tonne.

 

U.S. corn costs around US$400/tonne in South Korea; switching from corn to feed wheat would thus save feed millers US$40/tonne.

 

Traders added that Asian grains buying is also likely to remain subdued next week because ocean freight costs remain high.

 

Demand for Asian rice, especially parboiled rice, however, is likely to remain high next week, as Nigeria continues to buy large volumes.

 

A trader in Bangkok said Nigerian buyers have inquired about buying 200,000 tonnes parboiled rice this week, though how much actual booking was done isn't known.

 

Most of the inquiries were for August shipments.

 

"This week, parboiled rice prices rose by up to US$30/tonne. As Nigerian demand remains robust, I expect more price gains next week," said a trader in Bangkok.

 

At present, parboiled rice is selling at US$820/tonne, free on board Bangkok.

 

Prices of other grades of rice, such as Grade B white rice, however, are likely to remain little changed next week, as major buyer the Philippines hasn't been very active in the rice market recently.

 

Meantime, there's some bullish news for soybeans in Asia: India's soybean crop is suffering from heat stress as there hasn't been much rain in the soybean growing provinces.

 

Traders said that if the western state of Maharashtra, a key growing region, doesn't get more rain, yields could be seriously hit.

 

"Earlier, we were expecting a sharp on-year rise in India's soybean output as farmers were planting more acres due to higher prices. But now, we will be lucky to have the same crop size as last year," said an edible oil industry official.

 

India's soybean production is critical for prices of soymeal in Asia, as almost all major soymeal buyers, such as South Korea, Taiwan, Japan and Southeast Asian nations, use Indian soymeal in their feed products.

 

A fall in Indian soybean production could hurt India's soymeal export volumes and lead to higher feed prices in Asia.

 

At present, Indian soymeal is selling at US$500/tonne, free on board, Kandla port.